1. Tax Insights
from Transfer Pricing
www.pwc.com
Canada issues proposed legislation
on country-by-country reporting
August 8, 2016
In brief
On July 29, 2016, Canada’s Department of Finance released draft legislative proposals for public
comment that would implement the country-by-country (CbC) reporting requirements proposed in the
2016 federal budget. The proposed amendments mirror the guidance issued by the Organisation for
Economic Co-operation and Development (OECD) under Action 13 of its base erosion and profit shifting
(BEPS) initiative and would be applicable for fiscal years beginning after 2015.
The draft legislation maintains the €750 million threshold proposed by the OECD and introduces
standard administrative penalties for gross negligence or failure to file the CbC reporting form. It also
refers to a prescribed form for filing, although this has not yet been released.
Background
On October 5, 2015, the OECD released its final deliverable on Action 13, which includes a
recommendation for tax authorities to require the filing of a CbC report by the parent (or a surrogate
entity) of a multinational enterprise (MNE) in its jurisdiction of residence. The OECD also released an
implementation package, including model legislation, related to these requirements.
In detail
The draft legislative proposals
include the introduction of new
section 233.8 of the Income Tax
Act (the Act), setting out the
reporting requirements for CbC
reporting. Once enacted, section
233.8 will apply to fiscal years of
MNE groups that begin after
December 31, 2015. The
proposed legislation mirrors the
OECD’s guidance on timing of
filing; thus, an MNE group with
a Canadian-resident parent
entity would need to file its CbC
reporting form within 12
months from the last day of the
reporting fiscal year.
Consistent with the OECD
guidelines, Canadian-resident
parents of MNEs (or, if certain
conditions are met, a Canadian-
resident constituent entity of an
MNE group that is not the
ultimate parent) will be required
to file an annual CbC reporting
form. MNE groups with less
than €750 million in
consolidated group revenues
(approximately C$1 billion) in
the preceding year would be
exempt from filing. The draft
proposals provide for
administrative penalties for
gross negligence or failure to file
the CbC reporting form (see
amended paragraph 162(10)(a)
of the Act).
The draft rules also include
provisions to allow a surrogate
parent entity to file a CbC
report. To qualify, the surrogate
entity must file a report with the
tax authority of its jurisdiction
of tax residence on or before the
filing date, and that jurisdiction
must meet the requirements
proposed by the OECD
guidelines.
Observations: As expected,
Canada’s legislative proposal
adopts, without change, the
OECD’s recommendations on
CbC reporting and adds a
penalty provision for failure to

2. Tax Insights
2 pwc
file. While the proposed legislation
will not be implemented before
completion of the comment period on
September 27, 2016, it seems likely,
given Canada’s past endorsement of
and adherence to the OECD’s
guidance on transfer pricing, that any
changes to the proposed amendments
will be made only if they are
consistent with the OECD guidelines.
In addition, while the specific details
of the CbC information required to be
reported have not been included in
the draft legislation, it is expected that
the prescribed form will closely mirror
tables 1, 2, and 3 as proposed by the
OECD in Action 13.
While the 2016 federal budget
indicated that Canada agrees with and
intends to follow the OECD’s
recommendations on transfer pricing,
the legislative proposals do not
include any other changes relating to
transfer pricing, such as the additional
documentation requirements
recommended by Action 13 with
respect to the master file and local file.
It remains to be seen how this revised
documentation standard will be
implemented in Canada.
The takeaway
Now that CbC reporting requirements
are imminent for Canadian taxpayers,
with first reports due at the end of
2017 for MNE groups with December
31 year-ends, it is crucial that MNEs
immediately begin to review their data
collection and processing capabilities
to assess any gaps or inconsistencies
so that these can be addressed before
the deadline. Compiling this
information early also will give
taxpayers sufficient time to properly
evaluate what information, if any,
should be included in table 3
(Additional Information) of their CbC
report that might facilitate an
understanding of the data, and how
that information should be presented.
Let’s talk
For a deeper discussion of how this issue might affect your business, please contact:
Transfer Pricing
Andrew McCrodan, Toronto
+1 416 869 8726
andrew.f.mccrodan@pwc.com
Gord Jans, Toronto
+1 416 815 5198
gordon.r.jans@pwc.com
Junaid Mirza, Toronto
+1 416 687 8609
junaid.mirza@pwc.com
Transfer Pricing Global and US Leaders
Isabel Verlinden, Brussels
Global Transfer Pricing Leader
+32 2 710 44 22
isabel.verlinden@be.pwc.com
Horacio Peña, New York
US Transfer Pricing Leader
+1 646 471 1957
horacio.pena@pwc.com
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